How to Minimize Your Workers’ Compensation Costs
When work-related injuries and illnesses happen on the job, workers’ compensation insurance is there to help cover lost wages and medical expenses for impacted employees.
Unlike other types of insurance, most states require employers to carry workers’ comp coverage. In Arizona, all businesses with at least one employee must carry workers’ comp. The lone exception is a sole proprietorship.
What Does Workers’ Comp Cover?
If a worker becomes injured or ill while working workers’ comp can help cover:
• Medical expenses
• Lost wages
• Ongoing care costs
• Funeral expenses
Benefits aren’t available to employee who get hurt or sick outside of work. They also may not be available for intoxicated employees who get into an auto accident, or employees who intentionally hurt themselves.
Ways to Manage Workers’ Comp Costs
Because of its compulsory nature, workers’ comp tends to be the most expensive line of insurance coverage for many employers — which means it’s critical to implement processes and procedures that help manage those costs.
Here are a few steps businesses can take to minimize and better manage workers’ comp costs:
Ensure proper coverage and classification: Rates for workers’ comp vary depending on the profession and type of work. Rates for an accountant will be different from those of an electrician or a roofer. If your company employs different types of employees, ensure each is properly classified for workers’ comp coverage. In industries that may require subcontractors, like construction, you want to ensure the sub is properly covered and provides a certificate of insurance for their workers’ comp policy. If you don’t, and a subcontractor gets injured on your job site, the claim could be made under your coverage.
Cultivate a culture of safety: Creating a work culture focused on safety is one of the simplest and best tactics to mitigate workers’ comp costs. Be sure to follow OSHA requirements and guidelines for safety in the workplace, as well as regularly communicate essential safety resources and best practices to employees. Routine checks also are a great tool to keep safety at the top of employees’ minds. All these pieces help add up to reduced accidents and injuries, increased morale among employees because you show that you care about their safety, and a stronger bottom line due to lower workers’ comp premiums and claims.
Create procedure for injuries: What will you do if an employee is injured on the job? Creating a procedure for quickly addressing and managing workplace injuries plays a critical role in building a culture of safety and keeping workers’ comp costs low. An injury procedure should include immediate actions for supervisors and other employees to take in the aftermath of an injury. Such plans will help reduce the severity of workplace injuries because employees will know their role in such instances and assist more quickly
Institute a return-to-work program: The sooner an employee can return to work following an injury, the less costly it will be for the bottom line. That’s why a smart return-to-work (RTW) program is an integral piece to any workers’ safety policy. They provide modified work options for injured workers, who, depending on their injuries and the advice of medical professionals, may not be able to resume their regular duties. Providing a path for injured employees to return to the workplace sooner boosts their morale and helps them feel productive while saving the employer money on the workers’ comp claim, future premium renewals and any potential recruiting/hiring costs associated with having the injured employee out of work.
Workers’ compensation coverage may be compulsory for most businesses, but high costs don’t have to be. By ensuring you have proper coverage, classification and policies and procedures to imbue a culture of safety throughout your operations, you can minimize your workers’ comp costs.
The team at Lovitt & Touché has a deep understanding of how to mitigate risks and manage worker’s comp costs for businesses of all shapes and sizes. Learn more about our business insurance offerings.